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Surviving Gold's Ups & Downs (DROOY)Rick Ackerman
We bailed out of two gold stocks yesterday - Canyon Resources and Durban Roodeport Deep - with no net losses. Not too shabby, considering the latter stock at one point was probing lows 50 percent beneath the previous day's close. It was quite a day for DROOY shares. In case you missed the news, the company's CEO said that improved efficiencies at Durban's South Africa mines had failed to offset the low Rand gold-price. As a result, DROOY plans to restructure part of its North West Operations, where labor currently represents 58 percent of total costs. I've said before that it's somewhat masochistic to hold South African golds in one's portfolio when there are so many promising mining companies operating right in our back yard. I guess that makes me a masochist, though, since I continue to hold a small DROOY position for my kids. Call it a hobby. But in my advice to you, I will always play it strictly by the numbers, initiating new positions only at promising pivots, taking partial profits when appropriate, and rigidly adhering to trailing stops. (Click on image to enlarge)
It was by applying all three of those tricks diligently that we managed to exit DROOY and CAU without pain. We'd bought a stake in both earlier this month at what turned out to be exact minor-trend lows. When DROOY rebounded shortly thereafter, I advised the sale of half the position at 1.48, seven cents below the stock's recent high. That sale looked pretty good yesterday morning, when DROOY wind-sheared down to 78 cents on the news. Bought the Bottom A few subscribers wrote to say they'd bought stock near the low, which is great. I put out an after-the-fact hidden-pivot target at 0.80, and although it was by then valueless to traders, it should have reassured those of you who got in near the bottom. The pivot at 0.80 would surely have been touted here as a speculative buy if I'd seen it coming, since 80 cents was about as nasty a worst-case scenario as I could have imagined. Actually, there is one hidden-pivot target below these levels, at 20 cents (!). But if are now long DROOY and prepared to stop yourself out on a two-day close below 0.78, you can probably avoid the tsunami, if it ever comes. Officially, we exited our 400-share tracking position at 1.03, since DROOY is now no worse than an even bet to test the low. In Canyon, we simply blew out a small position at 0.79 that we'd bought for 0.82. Incidentally, I heard last week from two top-tier forecasters, one of them legendary among gold bugs. He was expecting bullion to embark on a major rally earlier this week. The other guy - well known, though not a celebrity - was calling for gold and mining shares to rally into the early part of this week, then head lower for the next two months. For my part, I have no dramatic predictions to hold you in thrall, at least not for the near-term. The best I can do for those of you suffering from "premature gold-fever" is to advise exactly as I did in Canyon and DROOY: 1) Buy only at swing lows; 2) take partial profits on rallies of at lest 15-20%, and 3) use trailing stops rigidly. *** Penny Pinching Grappling with the trend? Check out Rick's Picks' archives to see how well Rick Ackerman has done with his forecasts and trading strategies. Rick Ackerman _______________ |
